U.S.-Canada tariff standoff moves toward a deal, but duties remain

The United States imposed an additional 50% tariff on $27.6 billion of selected Canadian goods on August 22, opening the latest U.S.-Canada trade confrontation that now shows signs of easing.

Canadian Prime Minister Mark Carney used a social media post to say he had a good conversation with President Donald Trump about the future of U.S.-Canada trade. Carney said the talks built on constructive discussions of a mutually beneficial deal that would create jobs, improve affordability, respect Canada's languages, culture and sovereignty, and produce an outcome in coming weeks.

Bloomberg quoted Trump: “A trade deal is very close.” He said the two countries were focused on reaching one, described its concept as good for U.S. farmers, the country and Canada, and claimed the United States had been losing money in Canadian trade for years.

The thaw follows a series of retaliatory actions dating back to August, not a formal end to the measures announced since then.

What changed under Section 338?

The U.S. action invoked Section 338 of the Tariff Act of 1930, citing Canada's discriminatory treatment of American products. Canada, the northern neighbor and second-largest trading partner, answered with 15%, 25% and 50% tariffs on various U.S. imports.

On September 8, the White House said it had issued several proclamations under Section 338 to ban certain products entering the United States from Canada. The bans took effect on September 29.

They covered:

• Motorcycles, including mopeds, and cycles with reciprocating internal-combustion piston engines of more than 800 cc cylinder capacity.
• Various dairy products, including forms of whey, molasses and non-alcoholic beer.
• Various alcoholic products, including beer, malt beer, wine, cider, whiskies, vodka, rum, brandy and other spirits.

CBS News put the affected trade value of those bans at around $967 million, with alcohol accounting for roughly 87%.

Last month, the White House further modified Proclamation 11048, titled “Imposing Additional Duties To Offset Canadian Discrimination Against the Commerce of the United States With Respect to Motor Vehicles.” It removed plywood sheets, some paper products, certain machinery and refrigeration equipment, and certain packing crates and boxes from the tariff scope.

It replaced them in the measure with certain valves, carpets, waste products and other items. The White House said the additions and removals would take effect on October 30.

The fact sheet said Section 338 tariffs apply to all covered goods whether or not they qualify under the U.S.-Mexico-Canada Agreement, and that they apply in addition to Section 232 duties under the Trade Expansion Act of 1962. For shippers, USMCA treatment does not erase Section 338 exposure.

Washington framed the changes as a response to Canada's continued and additional retaliation and discrimination against U.S. commerce, saying they would protect American farmers, manufacturers and partners. The Wall Street Journal called the action a bid to help Maine Sen. Susan Collins and other Republicans in the upcoming midterms.

What does the thaw change for shippers?

For now, the thaw changes the negotiating signal, not the duty schedule. No terms. No tariff-removal timetable. No product-clearance list. Carney and Trump released none of those details, so the Section 338 tariffs and September bans remain the commercial framework shippers must use.

Tosca Derrick, director of Baker Tilly trade management services, put the operational priority plainly: “Many companies in North America have supply chains; they're really interconnected.”

Her advice was to establish country of origin, determine how much of an item was made in Canada, recalculate landed costs, review supplier contracts and build flexibility. Customs enforcement, she said, raises the stakes for that origin work.

That reaches beyond companies buying directly from Canada. North American suppliers can transmit the tariff impact through a firm that never places a Canadian import order, which makes the landed-cost calculation a sourcing question as well as a customs question.

For carriers and forwarders, the announcement changes no published freight rate, allocated capacity or transit schedule. No TEU, tonnage, truck-capacity or vessel-allocation figure accompanies the shift, and no port call changes. The exposure runs through the consignments they handle: origin evidence, supplier documentation and landed-cost assumptions must line up with the Section 338 treatment.

The next checkpoint is a written framework from Washington and Ottawa. Until they publish what duties and bans will fall away, and when, shippers should keep calculating Section 338 exposure rather than price a promised deal into their next tender.